While developing their own unique "brand" the organization was still bound by many systems and processes put in place by the original executive board of their parents companies. With the split there were a variety of contracts that were put in place. Many of these contracts began with the intention of having our company have an "adjustment" period to develop our own standards before splitting off. These contracts were overseen by the ATO or the "Agreements Transitions Organizations". This group was solely seen as the mediators who oversaw all the contracts through to the end and acted as a liason between our company and the parent company.
I worked in Corporate Finance supporting Corporate Administration. My project for the summer was to assist in the purchasing of an aviation fleet that was jointly owned between us and parent company. At the 18 month mark, we were to officially own 50% of the fleet and they would own the remaining half. While this had an accounting cost that could be seen in the purchase of X% amount of the fleet and a sale of Y% of our fleet, it also had transactional costs. There were a few different types of transactional costs that were incorporated in this purchase.
- Since we were contractual bound by the parent company to purchase X% amount of fleet and sell Y% amount of our fleet to end in a 50/50 ownership of the fleet, there was a cost to developing that contract with legal and then enforcing it through the ATO group.
- Additionally, the fleet that we had purchased was used. The aviation fleet was coming close to the end of their useful life, so there was a transaction cost in looking for replacement fleet that met business demand as well as price constraints.
- When we ultimately decided to replace the planes, there was a transaction costs in finding a third party to sell of the airplanes and then paying them to do the actual brokerage for the sale of the useful parts of the plane.
This summer internship was a great test to what a traditional corporate finance role as well as the significance of understanding organizational and industry effects on individual transactions.
I found this a little hard to follow. Since you use the expression "parent company" it is tempting to consider the company you interned for as the "child company." But it also sounded like this was something of a horizontal split in the business, with biopharma a different sort of business then traditional pharmaceuticals, which perhaps might be referred to as chemopharma. That confusion was amplified because you never explained the reason for the divestiture. Normally you think of certain synergies as justifying different divisions to be part of the sam company or economizing on certain business processes (marketing, accounting, etc.) as an alternative explanation. The opposite is need to explain divestiture. (Though sometimes it comes about because of fights between the division heads.)
ReplyDeleteYou did spend time in your piece talking about the adjustment period and each of the new companies developing its own brand, developing standards for that. But it wasn't clear why that was necessary. So what I mentioned in the previous paragraph was intended to get you to ask exactly that.
Then I got lost on the issue of resale of a fleet of planes that was very near end of life. That didn't make much sense to me. You might have provided more context for that. There is a general issue in any divestiture, how the various assets and liabilities of the old company get divvied up among the new ventures. A related question is when this happens. If the planes had been sold off before the divestiture, then the new company could decide what sort of fleet and how many new planes it wanted. But the way you described things it sounded like the old company wanted to assign that number to the new company. If that is right, the question is why.
Then you might have switched gears and said something about whether this experience offers you some possibility for future work and/or if you learned anything from the experience about seeking future internships or doing a job search.
The last bit you might have commented on was whether you interacted with other interns on this project and what sort of supervision you had. With this, how much autonomy you had and how the work was coordinated are the sort of issues that are most of interest to the class. If you have a chance, you can amplify on that in your response to my comments.
To clarify, the organization split up between biopharma (the actual compunds) and then the original company (which they refer to as the parent company) kept the medicine and nutritional products. They split off so they would be able to specialize seeing as the pharma products require more of an emphasis on R&D as opposed to nutrition/ hospital products need more of a focus on efficiency and improvement.
ReplyDeleteIn regards to the internship experience, I had two main relationships: between myself and the other interns in the program and then with me and my group/manager. As for the other interns, since we participated in an "internship program" as opposed to being "summer contract labor" we were provided networking opportunities by the company and among the group. I think it was opportunities like these that made me feel more connected to the company. I had a personal tie and felt accountable to keep my work up to par with the other interns that I was friends with. As for my group, that dynamic was different.
As for the planes, the contract was written so that each part of the organization owned a percentage of four total planes. They could have split it up 50:50 but since the original company owned 2.5 of the planes and we owned 1.5 for the initial year and a half, it was broken up by percent usage allowed. The new company purchased the planes as written in the contract by the old company, then sold at salvage value to replace with new planes which they chose, per your commentary. The new planes they purchased were models that fit business needs/capabilities. The planes which were the assets, were sold off for cash as an asset, which was put towards purchasing the new planes which left them with liabilities of the accounts payable for the difference.
I worked in Corporate Administration which is a sub function of Corporate Finance. The group was structured with one manager, one senior analyst, and five analyst underneath my manager. I was held accountable to my manager for performance review and work, but I also was part of the group. Therefore I had to always be actively working to ask others in the group what I could help with since part of my evaluation was team work.
My relationship with my group was more performance based where as with the other intern the relationship was based on networking and informal organizational feedback (what are they doing, what have they learned, what are other roles like, etc.)